How to Build a GREAT Allied Health Practice
#3: Improving CASH FLOW for your Allied Health Practice
Nearly all allied health business owners indicate that they want to grow their practice. However, understanding how they will do so is another story altogether. Among the common setbacks is ‘lumpy’ cash flow. Ups and downs in income and expenditure make financial management difficult and this can undermine confidence, leaving businesses to stagnate. Knowing how to improve your CASH FLOW will help you grow your business.
A clear understanding of where your income is derived and where it’s spent is not only a cornerstone of sound financial management, it provides a sense of control for you as the business owner.
Taking control of your cash flow begins with having good systems in place, including real-time accounting software. With access to accurate financial data you will be able to take numerous actions to improve your cash flow. Peaks in expenditures can be examined and solutions sought for spreading costs more evenly over a quarter.
In my experience, having a working 12-month cash flow forecast is integral to getting this right and building in the necessary buffer for you to manage the peaks and troughs of the business cycle. This will enable you to manage the lows of holiday seasons and cover the large bills (eg. insurance) when they come through.
Understanding your cash flow will also enable you to manage growth. In the early stages, the extra expense necessary for growth can often outweigh income. Knowing when and how your income will fall short will enable you to be prepared so that you can implement funding solutions that will enable to you comfortably meet your obligations.
Similarly, the costs of larger premises, additional administrative staff and professionals to deliver services need to be considered in your cash flow and funding strategy.
For allied health professionals making the transition from a personal delivery service to a practice delivery model, predictable cash flow and funding that bridges gaps while you are growing will also afford you an acceptable work-life balance while you are growing.
When working with allied health professionals, I ask 6 key questions, then work closely with them to determine answers that will enable them to achieve their growth goals:
- Is there sufficient capital to grow?
- Do you know how much you can borrow?
- Do you have an annual budget?
- Have you separated fixed and variable costs?
- What’s your break even point?
- Is your lender providing you with cash flow funding and is it asset-backed?
Question 6 is particularly important as you need to talk to a bank that is willing to lend against the value of your practice rather than the value of your home or your personal assets.
If you can present accurate reporting that includes reliable cash flow, budgets and projections that support your business goals, your bank will feel confident in your ability to achieve your growth goals and be more likely to provide the funding you need.
In my next article, I’ll write about making the TRANSITION from a personal delivery service to a practice delivery model, but in the meantime, if you would like to know more about cash flow and financial management for achieving growth, please contact me on 07 3171 4255 or email firstname.lastname@example.org
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A director of q4 financial, Grant Titman is a Certified Practicing Accountant and Business Advisor.
Grant specialises in helping established allied health business owners who typically employ 6 or more professional staff, and who seek to GROW, IMPROVE THEIR CASH FLOW and TRANSITION to a profitable Practice Delivery model.
The information contained in this article is general and is not intended to serve as advice. No warranty is given in relation to the accuracy or reliability of any information. Users should not act or fail to act on the basis of information contained herein. Users are encouraged to contact q4 financial professional advisers for advice concerning specific matters before making any decision.
A CPA and Director of q4 financial, Grant Titman brings leadership and the disciplined energy of an endurance runner to deliver ‘big picture’ outcomes for his firm and his clients.
Grant’s expertise includes and extends well beyond achieving profitability and growth for his clients’ businesses. His focus is squarely on helping his clients to achieve three key goals: extract wealth from their business; set and achieve long-term wealth objectives; and ultimately, enjoy financial freedom.